An Israeli civilian and three militants have been killed during an attack near the southern border with Egypt, Israeli military officials have said.
They said gunmen had attacked a convoy of construction workers building a security fence along the vast border along the Sinai desert.
Two workers were injured and one later died of his wounds, Israeli media said.
Separately, in two Israeli air strikes in the Gaza Strip, four other militants were killed.
Israel's Defence Minister Ehud Barak said the attack near the Egyptian border was a "disturbing deterioration".
The gunmen appeared to have crossed from Egypt's turbulent Sinai Peninsula into southern Israel.
The attack took place about 18 miles (30km) from the Gaza Strip, near the border villages of Kadesh Barnea, Nitzana and Beer Milcha, AFP reported.
Israeli officials said at least three gunmen had opened fire at the convoy of vehicles and also detonated an explosive device.
"A terrorist squad opened gunfire and possibly also fired an anti-tank rocket at an area where [Israel] is constructing the border fence," Israeli military spokesman Yoav Mordechai told army radio.
"Soldiers arrived on the scene and killed one terrorist."
They said that a second militant had been killed when the explosive device he was carrying detonated and the body of a third was found at the scene.
The workman who died was an Arab citizen of Israel, according to Reuters news agency.
The entire border area, including a major road near the coastal resort town of Eilat, was closed for a few hours after the attack and roadblocks were set up.
Military officials said they believed other militants involved in the attack had escaped back across the border into Egypt.
The US condemned the militants' actions and said it was concerned about the security situation in the Sinai peninsula.
Washington highlighted the need for political stability in Egypt, where upheaval after the overthrow of Hosni Mubarak last year led to a wave of unrest in the Sinai.
Later on Monday, Israel carried out an air strike on Beit Hanoun, in the northern Gaza Strip, killing two Palestinians on a motorcycle. Islamic Jihad said the dead men belonged to the militant group. Israel's military said they were planning to attack Israel across the border from Gaza.
An hour later another Israeli air strike killed two more men in Beit Hanoun and wounded three others, a hospital official in Gaza told AFP. Israeli officials confirmed the air strike and said it was targeting was a squad of Palestinians launching rockets.
Military sources said neither of the incidents in the northern Gaza Strip were related to the attack along the Egyptian border, which came just 48 hours after rockets were fired into southern Israel from the Sinai desert.
According to AFP, Israeli police said a rocket had been fired in the Hof Akhkeon area of southern Israel, to the north of the Gaza Strip. No injuries or damage were caused.
"Only yesterday, two rockets were fired towards the southern Negev," Mr Barak said, demanding Egypt tighten control of the area.
"We await the [Egyptian presidential] election results. Whoever will be elected, we expect him to take responsibility on all of Egypt's international commitments, including the peace accord with Israel and the security arrangements inside the Sinai and to swiftly put an end to these attacks," he said.
In August last year, gunmen crossed the border into Israel and attacked buses near Eilat, killing eight people.
Israeli sources said the latest cross-border attack showed a relatively sophisticated degree of planning and co-ordination and bore many similarities to the August incident.
The frontier fence will run most of the length of the 165 miles (266km) from Eilat, on the Red Sea, up to the Gaza Strip, according to Reuters.